If my mother ever treated my husband and children the way your husbands mother does, I would just cut her right out of my life. I am sorry to be mean, but if she is hateful to my other loved ones, I would not want to have anything to do with her at all and I would tell her that. If she loves her son she should treat his family with respect.
I am sure it is hard for you and your daughter, especially a little girl who can't understand why grandma is the way she is. Luckily for your daughter she has you, a very loving mother!